Airline Pension Relief Bill In Sight

[Wretched Wrench]

Pension relief for airlines in sight

By MARILYN GEEWAX
The Atlanta Journal-Constitution 09/22/05


Washington — The U.S. Senate could pass an airline pension relief bill "within a week or 10 days," Sen. Johnny Isakson (R-Ga.) said Wednesday. The bill is expected to bear on whether Delta Air Lines defaults on its pension plans while in Chapter 11 proceedings.

After several rounds of talks with key lawmakers this week, "things are progressing," he said in an interview.

This summer, two Senate committees approved broad pension legislation that would give major airlines 14 years to pay off their underfunded pension plans, up from roughly four years under current law. The full Senate has not yet taken up the legislation.

Delta and Northwest Airlines, both in Chapter 11 and facing large pension plan shortfalls, want Congress to let them spread out payments over 25 years to conserve cash. Together, they have about $16 billion in shortfalls, or the difference between the money in their funds and their total liabilities.

Isakson, a primary supporter of airline relief, said he still is negotiating to work out a compromise between 14 and 25 years. He said Senate leaders may hold a vote on a standalone airline bill, rather than the overall pension package, to move the matter along more quickly.

Such a bill could be sent to the House for a quick vote, he said.

In bankruptcy court, Delta and Northwest could ask for their judges' approval to default on their plans.

The federal Pension Benefits Guaranty Corp. would take over pension payments to retirees, up to certain limits. United Airlines took such a step this summer.

Members of Congress are concerned the PBGC itself could be overwhelmed by pension defaults, leaving taxpayers to make good on pensions.

Isakson said allowing airlines to stretch out payments makes it less likely they will default and would be "good for the industry and the retirees and the taxpayers."

 

[FWAAA]

Several weeks ago, it was reported that Delta wanted the legislation to require that pension plans be frozen in order to take advantage of the stretched out period of repayment. At the time, AA was against requiring that the plans be frozen, especially since its underfunded amount is the smallest percentage in the industry. Dunno if the current bill still requires freezing the benefits or not.

 

[WorldTraveler]

Delta announced they were freezing their non-pilot pensions today anyway.

 

[Boomer]

From what I understand, the freeze is the quid-pro-quo for the stretchout.

The PBGC and Congress want to know the extent of their downside and fix it in place. Without a freeze, underfunding scenarios could get deeper and the PBGC downside increase.

 

[Wretched Wrench]

American calls proposal unfair

By TREBOR BANSTETTER
STAR-TELEGRAM STAFF WRITER 2 oct 2005

New provisions in the effort to reform the nation's pension laws could put American Airlines at a disadvantage against bankrupt competitors -- and encourage the airline to freeze its own pensions.

That's the concern of American executives and union leaders, who say the provision that surfaced in the U.S. Senate this week unfairly penalizes airlines that are trying to keep their pension plans intact.

"The fact is, it's going to be very difficult to compete with carriers who are dumping their pension plans while we're trying to hang onto ours," said Ralph Hunter, an American pilot who is president of the Allied Pilots Association. "This would make things even worse."

Lawmakers are scrambling to finish pension reform legislation this year, worried that more troubled pension plans could be turned over to the federal Pension Benefit Guaranty Corp., an agency that is already strained by a host of pension defaults in the past year.

Provisions being considered by legislators include a proposal that would allow airlines that have frozen their plans to go 14 years before fully funding their pensions and guarantee them a favorable interest rate on the plans.

Meanwhile, airlines that haven't frozen or terminated their plans -- American and Houston-based Continental Airlines -- would have to pay their pension shortfalls within two or three years, and at a higher interest rate.

"This puts us at a significant competitive disadvantage, simply because we're trying to fund our employees' well-deserved retirements," said Ned Walker, a spokesman for Continental.

"We need legislation that does not force us to freeze our plans," said Tommie Hutto-Blake, president of the Association of Professional Flight Attendants.

American officials hope they can change the language of the law to give all airlines the same relief, regardless of their financial condition.

"The situation is extremely fluid right now," said American spokeswoman Lisa Bailey. "We're pushing very hard for the changes that we need."

The latest provision was introduced in the Senate this week by Sen. Chuck Grassley, R-Iowa, and co-sponsored by Sens. Max Baucus, D-Mont., Michael Enzi, R-Wyo., and Edward Kennedy, D-Mass. The House pension reform bill does not currently have an airline-specific provision.

Hunter said American's unions and executives are counting on Texas lawmakers to level the playing field.

"We're getting a good reception to our message," he said.

Ralph Kruger, who oversees pension issues for the American pilots' union, said the skyrocketing price of fuel will further strain the airline's pensions in the days ahead.

"Let's face it, fuel puts an extreme pressure on our business model," he said.

Kruger pointed out that pilots approved steep wage cuts in 2003 in part to keep the pension plan intact. Protecting those pensions remains a top priority for the union, he said.

While other airlines have frozen or terminated their pensions, American and Continental have been contributing millions of dollars to their retirement plans. This year, American has contributed $287 million to its pensions, Continental $239 million.

Two airlines, United Airlines and US Airways, have terminated their pensions. Many analysts expect that Delta Air Lines will also attempt to dump its plan. Delta and Northwest airlines, which recently filed for bankruptcy protection, have frozen their plans.


--------------------------------------------------------------------------------
Trebor Banstetter, (817) 390-7064 tbanstetter@star-telegram.com

 

[Bob Owens]

Well to me it seems that the boys in DC want to punish companies that provide pensions and reward companies that get rid of them.

Well isnt that just great?

One of the reasons why pensions are in such bad shape is because of the fact that instead of putting the pension money into low risk investments companies were allowed to put the funds into the stock market. The extra cash inflated the value of the market making stockholders richer as more dollars sought stocks. At the same time the inflated values of stocks(thus the value of the fund) were also inflated. These inflated prices appeared as a surplus in the pension fund. This allowed companies to not only skip making payments but actually take money out of their pension funds. Now these plans are coming up short and companies find that they owe huge amounts of money when they are least able to provide it.

Now Bush and company want to do the same thing they did with our defined pensions and 401Ks to Social Security.

When will we ever learn.

S&L scandal.

LTCM

Pensions.

Next, Social Security.

They all had one thing in common. A few people made tremendous amounts of money despite tremendous failures, and we paid the bill.

 

[Bagbelt]

I've got to learn how to speak Canadian soon.

 

[Wretched Wrench]

I've got to learn how to speak Canadian soon.

[post="308758"][/post]​

EH?

.

 

[MiAAmi]

bizjournals.com
Airline pension bill stalls in U.S. Senate
Tuesday October 4, 4:05 pm ET


A bill that would give Northwest Airlines more time to fund its pension plans -- something the airline says it badly needs to restructure -- has stalled in the Senate, according to wire reports.
Reuters news service reported Tuesday that Sen. John Cornyn (GOP-Texas) had blocked the pension bill after hearing criticism of the plan from Texas-based airlines AMR Corp. (American Airlines) and Continental Airlines Inc. Those airlines have charged that the bill would unfairly benefit companies that file for Chapter 11 bankruptcy, as Eagan-based Northwest Airlines Corp. (Pink Sheets: NWACQ - News) and Atlanta-based Delta Air Lines Inc. (NYSE: DAL - News) did last month.


The Senate pension proposal would help distressed airlines by giving them 14 years to repair pension underfunding. Northwest and Delta Air Lines Inc. of Atlanta have lobbied in support of the bill.

 

[TWU informer]

So,

Government still decides competition in the de-regulated industry?

 

[AMFAMAN]

The Senate pension proposal would help distressed airlines by giving them 14 years to repair pension underfunding. Northwest and Delta Air Lines Inc. of Atlanta have lobbied in support of the bill.

[post="308775"][/post]​

How about a bill that makes the pensions the first on the list of creditors upon going into BK. After they are fully funded, then divide of the rest of the cash to the rest of the creditors. Should stop the investing in airlines that should have gone out of business.

 

[MiAAmi]

Senators resolve airline pension fight
Grassley: 'More leniency' for Continental, American



http://us.rd.yahoo.com/finance/external/cb...FC9A96903A8A%7D

 

[FWAAA]

How about a bill that makes the pensions the first on the list of creditors upon going into BK. After they are fully funded, then divide of the rest of the cash to the rest of the creditors. Should stop the investing in airlines that should have gone out of business.

[post="308792"][/post]​

I agree completely. The pensions should have never been treated as an unsecured liability - that's the fault of the bankruptcy lawyers who screwed up when the US Bankruptcy Code was originally written. Prime example: UAL. Assets should have been sold and proceeds contributed to pension plans.

 

[Bob Owens]

I agree completely. The pensions should have never been treated as an unsecured liability - that's the fault of the bankruptcy lawyers who screwed up when the US Bankruptcy Code was originally written. Prime example: UAL. Assets should have been sold and proceeds contributed to pension plans.

[post="309184"][/post]​

Scewed up? Or was it deliberate?

 

[PRINCESS KIDAGAKASH]

If they don't have the money now, what makes anybody think they will have it 14 years from now? :wacko: :wacko: :wacko: :wacko: